The occurrence of a Global El Niño phenomenon, coupled with a Coastal Niño over the last quarter of 2023, poses a significant risk over four regions that concentrate 25% of the national agricultural production, in addition to the provision of some of the most important foods in the basic Peruvian family basket, such as rice and the lemon.
A recent report from Credicorp Capital clarifies that the total expected impact of these two phenomena, in addition to the lag left by Cyclone Yaku, will be between 0.7 points and 1 point on national production and infrastructure at the end of the current year.
According to the report, the economic impact that El Niño has left in Peru —in any of its two versions— has oscillated between 0.7% and 5.3% in the last four decades. Meanwhile, the blow to the national infrastructure has been between 0.2% and 2.5%.
It is worth mentioning that, currently, there is an 88% probability that a Global Child for next summer. For its part, Peru’s El Niño Costero has 84%, with an expected magnitude “between weak and moderate”, according to official data from Enfen.
Precisely, the Central Reserve Bank of Peru (BCRP) took this information to lower the GDP forecast for 2023, which went from 2.6% to 2.2%, while that of potential growth was revised from 2 .9% to 2.6%. In the case of Credicorp Capital, this forecast fell from 1.7% to 1.1%.
inflation would pick up
According to the composition of the Peruvian basic food basket, the impact of the price of food is much higher than that of energy. According to Jonathan Gutierrezsenior associate of Buy Side Research of Credicorp Capital, there is a feedback mechanism in this area that makes the inflationary impact even more sensitive than the price of oil.
The problem is that the four regions that would be most affected by El Niño are Tumbes, Piura, Lambayeque and La Libertad, which together explain around 12% of GDP thanks to their large contributions in the fishing (40%) and agriculture (25%) sectors.
Within these regions, the sectors most vulnerable to climate change are agriculture, fishing, transportation, and manufacturing, which account for around 50% of the regional economic activity in each of these departments.
“If one looks at the part of lemons, for example, we could argue that if you wanted to prepare four dishes of ceviche, but you closed the supply from the north, you would be left with only one dish. Another is the case of national rice. Out of every ten dishes, between seven and eight would disappear from your table, ”he explained for his part. Dario ValdizanExecutive Director of Buy Side Research at Credicorp Capital.
Disruptions in the food chain
The effects of a departure from the northern supply in the national food supply would reach the mangoes (90%), sugar (75%), and asparagus (50%), in addition to blueberries.
In the case of fishing, Credicorp Capital specifies that, even if the first anchovy catching season was authorized from Imarpe, the deadlines “would no longer be enough” for this sector to be able to recover by the end of 2023.
The report ends by noting that a minor potential growth of our economylike the one anticipated by the BCRP, would imply permanent growth at lower rates and this would have an impact on the absorption of new labor into the labor market, lower consumption and, probably, higher poverty rates.
El Niño gets ready to measure the governments in Latam
Governments in Latin America today have less financial flexibility to contain the Global Child than in 2016, according to Moody’s.
The period from December 2016 to May 2017 formally qualified as a Coastal Child of moderate magnitude in our country, with neutral conditions in the central pacific.
El Niño of 2017 caused serious economic losses of up to US$3.1 billion, which at the time came to be equivalent to 1.6% of GDP.
The price of lemon increased by 493% between January and August 2017, according to official data from Midagri.
Last March, Credicorp Capital estimated that the losses in the north due to the intense rainy season generated losses of up to S/13,000 million.
The key
Debacle. Historically, the northern coast of Peru has been the most affected by El Niño. The Moche civilization itself suffered its ravages.
El Niño phenomenon: a historical impact of up to 5.3%. Photo: La República/Infographic: R. Medina
Source: Larepublica
Alia is a professional author and journalist, working at 247 news agency. She writes on various topics from economy news to general interest pieces, providing readers with relevant and informative content. With years of experience, she brings a unique perspective and in-depth analysis to her work.
